Stop Larry Summers

July 24, 2013

Rumors are circulating that President Obama is planning to appoint Larry Summers to replace Ben Bernanke as head of the Federal Reserve. This would be a terrible mistake. In the 1990s, Summers led the effort to stop Brooksley Born from regulating derivatives, precisely the financial instruments that magnified the housing bubble and accelerated the financial collapse. While Treasury secretary he pushed Congress to eliminate Glass-Steagall’s firewall between commercial and investment banks and he oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives.

Janet Yellen, the vice chair of the Federal Reserve Board in Washington and the other rumored front-runner, would be a much better choice. She’s a strong voice for job creation and assertions that she lacks the “toughness” or “gravitas” for the job reveal more about the sexism of her critics than they do about the deeply experienced economist.

As William Greider writes, by appointing Summers, the president would be “rewarding the same guys who got things disastrously wrong for the country—the Clinton-Rubin policy makers who danced to Wall Street’s tune of financial deregulation and collaborated with the Greenspan Fed and Wall Street to gut prudential regulation like the Glass-Steagall Act.”

TO WATCH

In this interview with Sam Seder, David Dayen explains how Larry Summers has positioned himself to become the next Fed chair and why his appointment would be such a big mistake.